Buy Now Pay Later Options
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When you're ready to purchase a new coat from Neiman Marcus or a new iPhone from Apple, you have the option of financing the cost of your order over time with buy now, pay later. BNPL, also known as point-of-sale loans, is kind of like a modern-day layaway option: Consumers can buy items online or in-store, and then split up the cost of a purchase over a few weeks or a few months with regular installment payments rather than pay for the entire purchase up front.
With so many buy now, pay later options available to consumers, which provider is best And for who When compiling this round-up of popular BNPL options, CNBC Select looked at factors like APR, late fees, available merchants, whether a credit check is performed and if the provider reports to the credit bureaus to help you determine which provider is best for you. (See our methodology for more info on how we reviewed each POS loan.)
Who's this for Affirm is a good choice if you need a longer-term financing option with a 0% APR and no late fees. It offers POS loans ranging from one to 60 months with a limit of $25,000 per loan. Affirm is one of the few buy now, pay later providers that offer consumers long-term financing options with a 0% APR.
Who's this for Afterpay doesn't consider itself a POS loan provider because it doesn't charge interest on its loans, but it is commonly referred to as a buy now, pay later provider so we've included them in this round-up.
Who's this for Sezzle, a Minneapolis-based buy now, pay later provider, is best for people who want a short-term loan, no interest, no reporting to the credit bureaus and flexible payment dates. It's one of the few BNPL providers that allow customers to reschedule one payment per purchase.
Sezzle offers short-term and long-term financing options. Its short-term financing option is a six-week loan where consumers make a down payment and bi-weekly installment payments on purchases up to $2,500. If you choose to reschedule a payment, you could pay off your loan over two months.
Who's this for Zip, formerly known as Quadpay, is a buy now, pay later service available internationally. Zip is a good choice for consumers who want to use a BNPL option wherever they shop and don't want it to affect their credit score.
Who's this for PayPal is a global financial technology system known for its online payment system. It launched its own buy now, pay later product known as "Pay in 4," which is a good option for people looking for a short-term financing option with 0% interest, no late fees that aren't reported to the credit bureaus.
The main advantage to using a buy now, pay later service, as opposed to paying with a credit card, is that they often don't charge interest and are easier to be approved for, though they typically require an upfront deposit.
This is such a timely question, and smart of you to ask before diving in! As you've noticed, "buy now, pay later" (BNPL) options are exploding, with retailers ranging from department stores to airlines allowing customers to pay for goods and services in installments rather than all at once. In fact, in 2021 over half of consumers have used a BNPL service such as Klarna, Afterpay or Affirm to finance their purchases.
Second, you may find it more difficult to stay on top of multiple purchases and payments, complicating your ability to track your spending and accurately budget. Plus, even if you make every payment on time, using BNPL services often won't build your credit score, which can haunt you later if you're trying to get a home mortgage, rent an apartment, or even get a job!
Buy now, pay later has emerged as one of the most popular payment methods: More than half of US customers have used a buy now, pay later service, and almost 10% of ecommerce transactions in Australia are paid using a buy now, pay later provider. It was the fastest growing payment method in 2020 in India and the UK, and analysts estimate that these services will account for 12% of total global ecommerce spend on physical goods by 2025.
Buy now, pay later (BNPL) is an alternative payment method that allows customers to purchase products and services without having to commit to the full payment amount up front. In doing so, customers have the ability to immediately finance purchases and pay them back in fixed installments over time. For example, a customer making a $100 purchase could pay for the item in four interest-free installments of $25.
You, as the merchant, receive the full payment of the item up front, minus any fees (just like a credit card payment), and don't have to manage the financing. The buy now, pay later providers take on the task of underwriting customers, managing the installments, and collecting payments, so you can focus on growing your businesses.
Once the purchase is complete, businesses receive the full payment up front (minus any fees). Customers pay their installments directly to the buy now, pay later provider, often with no interest and no additional fees when they pay on time.
Buy now, pay later services generate revenue by charging fees to both customers and businesses. Business fees will depend on the provider, but will normally include a fee for the initial setup process and a fixed fee for each transaction. Customer fees are generally related to interest charges or late fees for missing payments.
For consumers, buy now, pay later services can offer a convenient, affordable way to make purchases. Buy now, pay later providers also take steps to ensure they offer responsible lending and services to consumers. For example, they provide information to consumers about the money they owe and how they set their fees, and require businesses to adhere to guidelines for how they communicate these services to their customers. Given the growing popularity of these services, some governments are considering introducing new rules in order to promote responsible practices and ensure consumers understand the product. Stripe is following these developments closely to understand how consumers and businesses might be affected.
Additionally, the cost of a product or service does not change when using a buy now, pay later service. If a product is priced at $100, the customer would still end up paying $100 to the business making the sale.
Affirm is modernizing consumer credit and changing the way people shop. Their predictive technology delivers personalized payment options that are tailored to each purchase, including flexible payment plans from 4 interest-free payments every 2 weeks to longer installments up to 36 months.
As a leader in the buy now, pay later space, Afterpay sets sensible and transparent initial spending limits for new customers that may increase over time, rewards customers for responsible spending, and has developed a one-stop solution for in-store and online shopping.
Klarna offers the most variety in payment options, which gives customers more freedom to choose when and how to pay for a purchase. Klarna provides payment solutions for more than 150 million shoppers and 450K+ businesses and is active in 45 markets.
Payments made with any payment method, including buy now, pay later services, appear in the Stripe Dashboard, reducing operational complexity and allowing for lightweight financial reconciliation. This enables you to develop standardized processes for typical operations such as fulfillment, customer support, and refunds.
Buy now, pay later apps offer an affordable, convenient way to make purchases. Some BNPL companies also report to the credit bureaus to help you build credit, assuming you make timely payments. Still, they may not be the best option for you as you could be tempted to overspend and incur significant penalties if you fall behind on payments.
Once Apple Pay Later is set up on your phone, you have two options when completing a purchase: Pay in Full and Pay Later. Selecting the latter option will bring up a payment schedule displaying the amount of each of the four payments and when they'll be due.
Some existing online payment systems provide buy now, pay later short-term financing similar to what Apple Pay Later is offering. PayPal's Pay in 4 program works very much like Apple Pay Later, except that purchases are limited to between $300 and $1,500.
BNPL app Sezzle also uses a system of four payments over six weeks, but permits users to reschedule one payment for up to two weeks later at no cost and postpone further payments for an additional fee.
The good news It's now available to randomly-selected users and will roll out to all eligible users in the coming months. The bad news Buy now, pay later services do not allow you to earn points and miles on your purchase and can get you into trouble if you miss payments.
Buy now, pay later options bridge a gap between stores and customers, benefiting both equally. Affirm has helped nearly five million customers by providing immediate access to the things they need while easing financial strain. And thousands of online stores have used their tools to find more customers and increase average order values.
LAUREN SAUNDERS: Well, buy now, pay later products, you know, can be better than a credit card if they help you avoid paying a lot of interest or amassing debt that you pay for months or years. But they can be tricky because they can make things look cheaper than they are, and people can add up debt in surprising ways.
SAUNDERS: Well, Apple Pay Later will be integrated into the Apple Wallet, so it would be very easy to use if you're buying something using an Apple device. They apparently are not going to give you the choice of linking your payments to a credit card, which is a good thing because you don't want to have the worst of both worlds - still paying interest on your credit card. But other than that, I think it'll be pretty similar to the other buy now, pay later products on the market - Klarna, Afterpay, et cetera.
SAUNDERS: Well, most people who use buy now, pay later do have other credit accounts. They tend to be younger. There is a higher percentage of people who are Black, Latino, females. And they tend to be lower income. A large percentage of people who have 20,000 to $50,000 of income use buy now, pay later. 59ce067264